Most of the publicly traded business-to-business and computer merchants posted impressive top-line growth during the second quarter. For three of the largest companies tracked, acquisitions drove much of that growth.
Revenue from acquired businesses helped bolster sales at Shoreham, MN-based checks manufacturer and small-business supplies merchant Deluxe Corp., Melville, NY-based medical, dental, and veterinary cataloger Henry Schein, and Pittsburgh-based computer networking products and services supplier Black Box Corp.
With the exception of Dallas-based Sport Supply Group, every merchant tracked by Wellesley Hills, MA-based investment bank Tully & Holland for Multichannel Merchant saw at least some revenue improvement. Profits, however, were another matter; seven of the 12 companies, or 58%, suffered year-over-year bottom-line erosion. Last year, 75% of the marketers tracked had posted gains. As Tully & Holland’s Tim Tully points out, for several of the firms with profit declines, one-time expenses as a result of recent acquisitions were a contributing factor.
Higher AOV leads to gains at Zones
Quarter ended: June 30 The facts: Despite a drop in the number of transactions, Auburn, WA-based computer reseller Zones was able to report a 3% hike in revenue, thanks to a higher average value. For the second quarter, sales totaled $127.6 million, compared with $124.0 million for the second quarter of last year. While the average order size increased 8%, to $1,340, the number of orders decreased 2%, to 98,852 from 100,706 last year. Sales from outbound telemarketing increased 8%, to $122.7 million. And online orders jumped a whopping 118%, to $21.3 million. Zones’ net income, meanwhile, increased 13%, to $1.3 million from less than $1.2 million last year. The skinny: Zones’ credit-card processing fees in the second quarter declined $58,000, due to an increase in outbound sales to businesses, which tend to purchase on open account rather than by credit card.
Schein shines again
Quarter ended: June 25 The facts: Henry Schein continues to churn out top- and bottom-line gains. Second-quarter net sales increased 21%, to $1.14 billion, which includes 19% local currency growth and nearly 2% related to foreign currency exchange. Net income increased a more modest 3%, to $40.0 million. For the quarter, dental sales rose 19%, including 18% growth in local currencies. Sales of dental consumable merchandise increased nearly 16%, and sales of dental equipment and services were up 29%. Sixteen percent of Schein’s overall growth for the quarter came from acquisitions, with international acquisitions responsible for 62% of the growth. The skinny: Part of the reason Schein’s net income increase was only 3% was that its selling, general, and administrative expenses jumped 35%.
Strong sales, earnings compute for CDW
Quarter ended: June 30 The facts: Sales at Vernon Hills, IL-based computer reseller CDW Corp. increased 11%, to $1.54 billion from $1.38 billion for the comparable quarter of last year. Net income increased 15%, to $67.1 million from $58.3 million. The total average daily sales for the second quarter rose 11%, to nearly $24.1 million from $21.6 million for 2004. Within the corporate sector, average daily sales rose 9%, to $18.2 million; total corporate sector sales for the quarter were just shy of $1.17 billion. Average daily sales for the public sector (government and educational buyers) were $5.82 million, an 18% increase over last year, while total public sector sales in the second quarter were $372.2 million. The skinny: Direct Web sales — those completed without the help of a customer service rep — increased 14%, to $422.6 million from $369.6 million last year.
| Q REVENUE | 1Q NET INCOME (LOSS) | |||||
|---|---|---|---|---|---|---|
| Company | 12 months prior | Current quarter | Increase (decrease) | 12 months prior | Current quarter | Increase (decrease) |
| (000) | (000) | |||||
| Black Box Corp. | $124,355 | $179,282 | 44% | $10,003 | $7,394 | (26%) |
| CDW Corp. | 1,382,904 | 1,539,595 | 11% | 58,275 | 67,061 | 15% |
| Deluxe Corp. | 309,000 | 434,000 | 40% | 46,000 | 42,000 | (9%) |
| Henry Schein | 945,690 | 1,141,620 | 21% | 38,936 | 39,974 | 3% |
| MSC Industrial | 255,297 | 288,465 | 13% | 23,873 | 30,688 | 29% |
| PC Connection | 335,335 | 350,710 | 5% | 2,256 | 1,726 | (23%) |
| PC Mall | 231,613 | 253,170 | 9% | 707 | (1,152) | NM |
| Programmer’s Paradise | 25,093 | 30,052 | 20% | 523 | 185 | (65%) |
| Sport Supply Group | 25,104 | 23,226 | (7%) | 1,296 | 621 | (52%) |
| Tessco Technologies | 110,605 | 148,323 | 34% | 1,443 | 1,235 | (14%) |
| Transcat | 13,222 | 14,065 | 6% | (427) | 174 | NM |
| Zones | 124,023 | 127,630 | 3% | 1,151 | 1,296 | 13% |
| Notes: NM = not meaningful | ||||||
| Source: Tully & Holland | ||||||